Archive for the ‘contracts / terms of use’ Category

It’s about online privacy and the fine print of websites and apps. The trailer looks great. Sadly, the film isn’t scheduled to be playing anywhere I’ll be, but here’s the upcoming schedule in case it will be making a stop in your town:

Movements are afoot to revise the law that was being used to prosecute good-guy hacker Aaron Swartz, who committed suicide last month under the threat of decades in jail.

It’s a crazy world when violating a website’s terms of service can potentially subject you to more prison time than murdering someone. But that’s what the Computer Fraud and Abuse Act, in its current form, allows.

Rep. Zoe Lofgren, Democrat from Silicon Valley, sought comment on Reddit on her plan to introduce Aaron’s Law. She has now posted a revised draft of the bill [pdf].

The most illuminating piece on the Aaron Swartz case and federal prosecutors’ overreaching is by Jennifer Granick, Aaron’s friend and a former federal defender. It’s broken into twoparts. I really can’t recommend Jennifer’s post enough – it’s the best blogging I’ve read in many months.

Tim Cushing at Techdirtpicked up on the post I did on the Barnes & Noble case (where I, in turn, was picking up on the post Venkat Balasubramani did on Eric Goldman’s Technology & Marketing Law Blog).

In my post, I tried to explain why arbitration is such a great deal for corporations. For various reasons I didn’t dwell on the question of whether corporations get better-than-fair treatment in the arbitration itself. But they do. Much better.

Cushing picked up where I left off by citing to a Seattle Post Intelligencer article reporting the results of a Public Citizen study finding that corporations beat consumers about 95 percent of the time in arbitration.

The Public Citizen study the PI was talking about appears to be this one: The Arbitration Trap: How Credit Card Companies Ensnare Consumers [pdf].

The details are interesting. The key statistic in the study is actually 94 percent – that’s the winning rate for corporations in the cases handled in California by the private arbitration service provider called the National Arbitration Forum. (California formed the sample pool because California, unlike other states, requires public reporting of some limited data by arbitrators.)

The 95 percent figure is for just a small group of specific 28 arbitrators. But it’s that elite group that gets almost all the work!

The Busiest Arbitrators Produce the Results Corporations Seek: In California, a small, busy cadre of 28 arbitrators handled nearly 9 out of every 10 NAF cases. This group ruled for businesses 95 percent of the time. Another 120 arbitrators handled slightly more than 10 percent of the cases in which an arbitrator was assigned. They ruled for businesses 86 percent of the time and for consumers 10 percent.

Can you imagine what it would be like if, instead of judges getting their salary from the government, they were paid by litigants. And can you imagine if there were different court systems competing with one another, all vying for the repeat business of litigants who constantly find themselves being sued? Well, you don’t have to imagine it: That’s arbitration.

As a corporate user of arbitration, you pick the arbitration firm upfront by selecting it in the terms of service or credit-card holder agreement. Of course, you are going to pick the firm that gives you good results. And since arbitration firms are competing for the loyalty of corporate customers, they are going to pick the arbitrators that give those corporate customers what they want. That’s not something dirty for the corporation to do, mind you. That’s just a general counsel doing her or his job. But it sure creates incentives that are skewed.

The report explains:

Arbitrators have a strong financial incentive to rule in favor of the companies that file cases against consumers because they can make hundreds of thousands of dollars a year conducting arbitrations. The arbitrators are chosen by the arbitration firms hired by MBNA and other corporations, which are unlikely to pick arbitration firms that produce results they do not like. Arbitrators routinely charge $400 or more an hour. Top arbitrators can charge up to $10,000 per day and some make $1 million a year. In comparison, California Superior Court judges earn $171,648.

(Yeah, judges don’t make as much. But, in fact, the judgeship is a great stepping stone to being an arbitrator.)

The Public Citizen report explains how systemic bias can develop:

A Race to the Bottom for Arbitration Firms: Companies track how arbitrators rule, and do not choose arbitrators who do not rule in their favor. One NAF arbitrator, a Harvard law professor, was blackballed after she awarded $48,000 to a consumer in a case in which a credit card company filed a claim against the consumer. After the same credit card company had her removed from other pending cases, she resigned, citing NAF’s “apparent systematic bias in favor of the financial services industry.”

Hey, do you get the feeling that Harvard law professor they might have been talking about was Elizabeth Warren? Yeah, me too! Warren was thanked in the acknowledgments section, but it’s just as likely she was their source for information about a different Harvard law professor. (Harvard does have a huge faculty.)

Before getting to the merits – whether Nguyen be able to get his tablets at the price at which he allegedly purchased them (and of course he should!) – B&N moved to enforce an arbitration clause in the B&N terms of service.

An arbitration clause allows a party – generally a huge corporation – to prevent a plaintiff – usually a consumer – from being able to litigate in court and get a trial by jury. Instead, the case goes to arbitration, where one or more arbitrators decide the case wholly outside the court system.

Corporations love arbitration in consumer disputes because arbitration alleviates the possibility of huge jury verdicts. It also can force plaintiffs to withdraw from the fight, because in the typical arbitration, both sides must pay the arbitrators fees, which can be too steep for a consumer to bear (in the thousands of dollars), especially when the potential recovery from an arbitration is likely to be low (maybe just in the hundreds or even less in a typical consumer dispute). Corporations also love arbitration because it prevents class-action litigation, which makes it economical to sue companies for having ripped off large numbers of people where any given individual’s loss was small. (It will come as no surprise that Nguyen’s suit was brought in a such a way that it could have blossomed into a large class action if the facts warranted.)

So B&N lost its bid to put Nguyen’s case into arbitration. Why? B&N couldn’t show that Nguyen had notice of the terms.

B&N buried the arbitration clause in terms of service that were linked to at the bottom of the bn.com pages. B&N could have had a pop-up “I agree” window or even just a box that Nguyen had to check saying he agreed to and had read the terms of service. They also could have written on the checkout screen about the transaction was subject to terms of service. But they didn’t do any of that. So, as a result, it looks like Nguyen will get his day in court.

Sounds like a win for consumers, huh? Balasubramani says not so fast:

It’s temping to see this case as a pushback on terms of service that contain arbitration clauses. However, it’s more likely an outlier in the sense that B&N’s terms of service implementation was so shoddy that it’s not likely representative of the typical terms of service case. If B&N had provided ample notice, the court would have probably enforced the terms and, as in the Slide and Zynga cases, required the consumer to arbitrate his claims.

Balasubramani sarcastically calls Nguyen’s claim “a tragic and sad story,” but says, “It’s tough to have much sympathy for B&N here … there’s zero excuse for not requiring the consumer to check the box and indicate assent to the terms as a condition of completing the transaction.”

Well, I think it’s hard to feel much sympathy for Barnes & Noble for the simple reason that they ripped Nguyen off. I say, give the man his tablets at the price he bought them! Barnes & Noble even sent an e-mail confirming the order … before they cancelled it. B&N has seller’s regret. Too bad. A deal’s a deal, I say. Cough up the tablets.

Unfortunately, you can bet Barnes & Noble will get their terms-of-service assent right next time.

Big online retailers like Barnes & Noble, eBay, and Amazon have consumer reviews and ratings to help consumers avoid getting ripped off when buying unfamiliar products or purchasing from a third-party seller. That’s great – ratings and reviews have been a positive innovation for consumers.

But clickwrap arbitration clauses have been a bad technological development for consumers. The portal entities – such as Barnes & Noble, eBay, and Amazon – have privileged positions in a not-so-competitive marketplace. There are few players, making choice limited. Consumers ought to be able to take these online companies to court when warranted. Unfortunately, the twin innovations of clickwrap agreements and arbitration clauses all too often make big corporate online players answerable to no one.

Last week I discussed the no-end-in-sight freelancer class-action litigation that was touched off by Jonathan Tasini’s landmark litigation in the 1990s against the New York Times for infringing freelancers’ copyrights by posting freelancer written material online without specific premission.

First of all, that’s just creepy. It’s not like publishers and contributors are married. And since they aren’t, what’s wrong with intruding into their relationship?

Meanwhile, Tasini’s latest litigation escapade is suing the Huffington Post for not paying him or others for blogging they volunteered to do for free. The latest I can find out of that lawsuit is that the The Huffington Post filed a motion to dismiss [PDF]. That’s their response to Tasini’s complaint. I’ve already blogged about the complaint, so let’s go ahead and take a look at the defendants’ motion.

The motion is filed under Federal Rule of Civil Procedure 12(b)(6). That’s a very common procedural move, and it’s well-known to anybody who’s spent much time in law school. But in case you haven’t, I can explain.

Rule 12(b)(6) allows defendants to have a judge bounce a lawsuit out of court in the earliest stage of a case in the event that, even if all the allegations of the plaintiff were proved true, there would still be no winnable lawsuit. So, how could it be that all of a plaintiff’s allegations could be true, and yet there would still be no chance of winning? Well, not everything worth complaining about entitles someone to compensation. In a civil lawsuit, the facts you allege have to give rise to a valid “cause of action.”

What Arianna Huffington, HuffPo, and AOL are arguing, through their lawyers, is that there is just no law out there that entitles Tasini to any money. Or, to state it more plainly, there’s no cause of action against someone for being greedy, mean, and successful. Here’s how the defendants say it:

Mr. Tasini … asks this Court to jettison his long-standing agreement with The Huffington Post and rule under New York state law that a competent adult in his position cannot agree with a website to publish his submissions in exchange for non-monetary consideration. He asks this Court to abrogate that agreement, as a matter of public policy, to combat “the broad detrimental effect of setting an artificially low price” for online content, and to reallocate at least a third of The Huffington Post’s value to recognize “the collective efforts” of other bloggers who also agreed to post without receiving monetary compensation. …

But no rule of statutory or common law, in New York or elsewhere, recognizes such a remarkable and unwarranted intrusion into the relationship between publishers and contributors. … [T]he fact is that no court, state or federal, has the authority under New York law to rewrite private agreements and reallocate private property in the manner Mr. Tasini seeks.

Now, while I think the law is on HuffPo’s side, this brief strikes me as being just slightly puerile. I get that there’s no precedent that supports the existence of a valid cause of action on these facts, but it seems a bit silly to me to be throwing around phrases like “a remarkable and unwarranted intrusion into the relationship …” First of all, that’s just creepy. It’s not like publishers and contributors are married. And since they aren’t, what’s wrong with intruding into their relationship? If it’s abusive, as Tasini suggests, then maybe we should intrude.

That’s why I think HuffPo’s lawyers are going a little astray here. It’s not about the relationship, it’s about the law, pure and simple. There’s no cause of action here. That’s all you need to say. When the law’s on your side – and boy is the law on HuffPo’s side – there’s no need to act like the sky is falling.

World Press Freedom graphic reproduced without permission and in knowing and intentional violation of UNESCO's terms of use. So there.

Today is the UN’s World Press Freedom Day. I note this year, as I did last year, that UNESCO is celebrating the day while making conspicuous assertions of I-me-me-mine intellectual property entitlements to their graphics. And their terms of use, by their own terms, disallow the re-use of their graphics for editorial commercial purposes:

All contents on this website are protected by copyright. UNESCO is pleased to allow those who may choose to access the site to download and copy the materials for their personal, non-commercial use.

The complaint in Jonathan Tasini’s class-action lawsuit against the Huffington Post, owner AOL, and founder Arianna Huffington has been posted online.

I’ve gone through it. If you don’t feel like reading the whole thing, here are excerpts I’ve transcribed that I think capture the essence of the complaint. (Italicized portions are my own paraphrasing. Otherwise, it’s quoted material.) As you’ll see, I’ve interspersed my own thoughts.

¶1:
This action seeks to vindicate the fundamental principle that creators of value deserve to be compensated and, in particular, addresses the important issues of (a) whether in the digital age, profitable digital media sites should be required to compensate the creators of valuable content from which such sites derive substantial revenues and (b) if so, how the creators of content should be compensated.

¶3:Of the $315 million paid by AOL to purchase HuffPo, at least $105 million was due to the contribution of content by the unpaid bloggers.

¶6:
… TheHuffingtonPost.com’s continued assertion that it, alone, should be enriched by the valuable content provided by Plaintiff and the Classes has the broad detrimental effect of setting an artificially low price for the valuable digital content created by Plaintiff and the Classes, depressing the market for such content and, over the long term, having a serious depressing effect on the value of intellectual content being created by Plaintiff and the Classes and on the ability of Plaintiff and the Classes to support themselves as creators of high quality, engaging, digital content. According to Article 1, Section 8 of the United States Constitution, the purpose of copyright is “to promote the Progress of Science and the useful Arts” by allowing creators to be appropriately compensated for their contributions. Yet, despite our founders’ intent, TheHuffingtonPost.com continues to assert that it, alone, should be enriched by the valuable content provided by Plaintiff and the Classes.

This leads me to one of the problems with this lawsuit. Should Tasini be successful with is unjust enrichment argument, which I don’t think he will be, he is vulnerable to a copyright pre-emption argument. That is, AOL and Arianna can argue that Congress’s legislation in this vein cuts off common-law causes of action that might otherwise exist. In fact, I think it was a bad choice for Tasini and his attorneys to put this reference to copyright and the Constitution in here; it just wraps up the pre-emption argument with a bow.

Arianna, can there be any surprise that this guy ended up suing you with a résumé like his?

¶23:There are approximately 9,000 unpaid content providers at TheHuffingtonPost.com

That makes it ripe for a class action, provided other elements are met …

¶¶29-33:Jurisdiction and venue. Allegations to create subject-matter jurisdiction under the Class Action Fairness Act of 2005 and establish the appropriateness of filing the litigation in federal court in New York.

¶33:
Finally, the “Terms of Use” for TheHuffingtonPost.com states “Any dispute between us will be governed by New York law.”

Yikes – what an endorsement for the enforceability of terms of use! I wouldn’t have gone there. What else is in the terms of use that Tasini would not want to be enforced?

¶50:
… Defendant Arianna Huffington’s statements indicate her own belief that the creators of content should be fairly compensated for the value provided.

¶51:
For example, in her book “Third World America” (Crown 2010), Ms. Huffington … states: “… The middle class, by and large, plays by the rules, then watches as its jobs disappear. The corporate class games the system – making sure its license to break the rules is built into the rules themselves.”

¶52:
Towards the conclusion of “Third World America,” Ms. Huffington writes that to avoid a “Third World America,” she believes the nation needs to make certain it is “a place where economic opportunity is once again real for everyone, not just the economic elite” and “a place where greed and selfishness are no longer rewarded and the ‘least among us’ are given a helping hand, rather than the back of it.” (page 237).

That’s pretty funny. She’s something like the opposite of a “victim of her own success.” That is, Arianna is basically a “beneficiary of her own failure.” Well, okay, you can accuse limousine liberals of being hypocrites. You can wave at them through the tinted windows. But they are just going to drive off to the next black-tie fundraiser you’re not invited to.

¶53:HuffPo is unlike other media outlets in that HuffPo selects its content providers and does not allow content from non-vetted providers.

¶56:
Plaintiff and the Classes were not officious contributors to the TheHuffingtonPost.com and, rather, were carefully selected, and in some cases recruited, by TheHuffingtonPost.com to perform services for it.

One of the purposes of those allegations, I suppose, would be to defeat sky-is-falling type arguments that HuffPo might make, such as, “Your Honor, if you award compensation to Tasini and the HuffPo unpaid bloggers, you’ll open it up for people to employ themselves by stuffing sites with unsolicited content and then sending the site owners a bill.”

¶57:
… the vast majority of the Classes’ members, like Plaintiff, are quasi-professional writers, meaning that they occasionally earn fees for their writing, but it was not their principal occupation. …

¶62:
Executives of AOL noted that $20 million in “cost savings” would be recognized by AOL due to TheHuffingtonPost.com’s history of not compensating Plaintiff and the Classes for high quality content. …

¶64:Allegations about “The AOL Way” document discussing how each post is tracked and evaluated in terms of the cost required to produce it and the revenue gained from it.

¶69:
Upon information and belief, AOL only offers to pay amounts for content which are less than the revenue potentially earned from that content. …

That sounds suspiciously like capitalism to me.

¶71:
In sum, by eliminating all costs associated with content production and placing those costs with Plaintiff and the Classes, Defendants are being unjustly enriched.

¶77:
Despite the value provided, Plaintiff and the Class were only offered “exposure.”

¶85:
Because of the system set up by TheHuffingtonPost.com, Plaintiff and the Classes gave the Defendants more exposure than vice-versa, namely, Plaintiff and the Classes typically shared the link to the content provided with their social networks, sharing via electronic mail, Facebook, Twitter and the like (as so encouraged and directed by TheHuffingtonPost.com) – driving internet traffic to the HuffingtonPost.com and creating value for the Defendants.

¶91:
… Arianna Huffington, at a meeting in Beverly Hills, California, February 8, 2011 stated: “People have not fully adjusted to the fact that self-expression is, for many people, a new source of fulfillment and entertainment … We have 9,000 bloggers with a password and literally get hundreds of submissions that our editors have to process. People are dying to blog for us … ”

¶¶92, et seq.:Complaints that HuffPo doesn’t give contributors information about how much exposure they are getting, such as how many page views they get.

¶94:
Finally, TheHuffingtonPost.com’s assertion that “writers write for free” serves to bring an ages-old falsity into the digital age, one this Court should reject. Indeed, writers, like all creators, deserve a share of the value they create and allowing such value to rest solely with Defendants is against equity and good conscience.

¶¶100, et seq.:
FIRST CAUSE OF ACTION
DECEPTIVE BUSINESS PRACTICE
(N.Y. Gen. Oblig. Law §349 et ff. as per the Terms and Conditions)
PLAINTIFF AND THE CLASSES v. DEFENDANTS

¶103:
It is deceptive to promise exposure (visibility, promotion and distribution) in lieu of monies to Plaintiff and the Classes, but then not provide a real and accurate measure of exposure and it is deceptive to solicit content on the promise of providing a free forum for ideas when, in fact, a product with tremendous value is being created by the solicited and uncompensated services provided.

Sorry to say it, but this doesn’t sound deceptive to me. Tasini and unpaid bloggers got exposure. Tasini wants more than that, but I don’t see how he was deceived into thinking he would get it.

¶107:
Plaintiff and the Classes provided valuable services to Defendants, services that were encouraged and accepted by Defendants.

This, I think, is the essential problem with the unjust enrichment claim: The defendants were actively encouraging the labor. The prototypical unjust enrichment claim is when an unconscious person arrives at the emergency room and receives life-saving treatment. The patient never agreed to receive the care, so does the patient owe the hospital and doctors compensation? The courts say yes, under a theory of unjust enrichment. It would unjustly enrich the patient to allow him or her to retain the benefits of the medical treatment without paying for it. Part of what makes it unfair is that there was no chance for the parties to make a contract, since the patient was unconscious. Now, imagine a patient came into a clinic and asked – even actively encouraged – being treated for free. If the clinic provides treatment for free, you can’t say the patient was unjustly enriched. There’s nothing unfair – nothing unjust – about the patient retaining the benefits of the treatment in this case, because the patient went looking for free treatment and got it.

Ironically, Tasini’s case for unjust enrichment would be stronger if HuffPo had somehow ended up with the content despite not having sought it out. I don’t know how that would hypothetically happen, but if it somehow did, then unjust enrichment might seem to fit the bill. Unjust enrichment is a flexible doctrine, and it’s not limited to the ER hypothetical or highly similar cases. But under the circumstances in this case, I just don’t see it.

On Monday and Tuesday of this week, I wrote about a breakthrough Righthaven copyright-infringement suit, filed on behalf of Righthaven’s new client, the Denver Post, against a local Tea Party activist blog from South Carolina, Lowcountry912.com.

Like many other newspaper websites, the Denver Post has inserted some clever code so that when you highlight some text and copy-and-paste it into another document – say an e-mail or a blog post – along with the text you copied, you also paste an additional bit of information that says “Read more” and then has the URL to go to see the story on the newspaper’s website.

Lowcountry912 has now removed their own reposting of the Mike Rosen column that they were sued over. But I saved a copy before they removed it. At the bottom of their repost, you see this:

Now, so you can tell what you are looking at, the pound sign (“#”) and the string of characters following the pound sign is an ID number that would have been unique to the site visitor that grabbed that text for Lowcountry912.

Why would a newspaper put this bit of code in? It seems clear enough that the paper understands you are copying-and-pasting, and the paper wants the recipient of your copied-and-pasted text to know where to go for more. That way the newspaper benefits from the free advertising you are doing for them.

So, here’s the $150,000 legal question: Does the insertion of the “Read more” text constitute an implied license to copy, paste, and redistribute?

I think so. The implication is that the newspaper knows you are copying and pasting, and they are okay with that.

But now there’s a twist. Are you ready?

When I went to the Mike Rosen column to test this out, and I copied and pasted the text into a blank document, here’s the tag I got at the end:

Read The Denver Post’s Terms of Use of its content: http://www.denverpost.com/termsofuse

See what’s different? There’s two extra lines instructing you to read the terms of use. If you do, you’ll find what amounts to a short essay on copyright and fair use. It includes this:

The fair use rule generally does not entitle users to display the whole story or photograph on their website. To do so is a violation of our copyright and we will use all legal remedies available to address these infringements.

So here’s another $150,000 question: Did the Denver Post’s code insert the instruction to read the terms of use before the Righthaven lawsuit, back when Lowcountry912 copied it?

If you know, please let me know.

And if anyone has a copy of the Denver Post’s terms of use from before they linked up with Righthaven, I would love to see those.

A “browse wrap” agreement is an alleged contract that binds anyone who views a website to the site’s “terms of use.” The name “browse wrap” is in the tradition of “click wrap,” and ultimately derives from “shrink wrap” agreements, a now largely historical device which purported to bind anyone who tore past the agreement sticker and through the shrink wrap on a new box of software.

A new case, Cvent, Inc. v. Eventbrite, Inc., no. 1:10-cv-00481-LMB –IDD (E.D. Va. Sept. 15, 2010) concerns browse-wrap agreements. Although the case doesn’t involve a blog, it has applicability for bloggers two ways. One, bloggers might try a browse-wrap agreement to bind visitors to their blogs. Two, bloggers may be potential defendants in a breach-of-browse-wrap suit when they link to or repost material from a website they have visited.

Justia has the memorandum opinion on the motion to dismiss and motion to strike, signed by Hon. Leonie M. Brinkema and dated September 14, 2010.